Gov. Susana Martinez’s administration has issued a proposed settlement with the Environmental Protection Agency for installing pollution controls at the San Juan Generating Station in northwestern New Mexico.

In August 2011, the EPA issued the Federal Implementation Plan, which ordered PNM to install select catalytic reduction technology on all four units of the San Juan Generating Station within five years, rejecting PNM’s proposal to install a less expensive technology called selective non-catalytic reduction technology.

Martinez filed a petition to repeal the FIP in the 10th Circuit Court of Appeals, which is still pending.

The EPA granted a 90-stay of the FIP in July 2012, and asked the New Mexico Environment Department to lead the effort to bring all stakeholders to the table to discuss alternatives. The NMED solicited proposals from stakeholders (none were submitted) and conducted a series of public meetings for input.

New Mexico Public Regulation Commissioners Jason Marks and Doug Howe submitted a plan that called for replacing some existing coal units at SJGS with modern natural gas fired technology, utilizing renewable energy sources in the region and installing the less costly SNCR equipment on the plant’s remaining units.

The state’s proposal mirrors the PRC plan, with the exception of utilizing renewable energy resources. PNM will retire Units 1 and 2 of the SJGP by December 2017, install SNCR equipment on units three and four and build a 150 to 200 MW peaking unit at San Juan and along with a natural gas pipeline. It will purchase additional power from existing gas-fired plants within the state.

PNM must also agree to no layoffs due to the plant closure and several measures to spur economic development in the Four Corners Region with specific targets for Navajo employment and retraining.

The EPA would be obligated to file a joint motion to stay the federal rule in the 10th Circuit Court litigation and issue an indefinite administrative stay of the compliance deadline for the current FIP.

“Our proposal will achieve significant environmental benefits that far exceed the federal plan, including significant reduction not only in nitrogen oxides, which is the main emission the SRC units address, but in carbon, sulfur dioxide, mercury and particulates,” said NMED General Counsel Ryan Flynn.

“There will also be significant improvement in visibility, a 40 percent reduction in water usage and the proposal costs significantly less than the federal one.

“This also allows the state to diversify its energy profile, unlike the federal proposal, which would lock us into coal generation for 40 or 50 years.”

Los Alamos Department of Public Utilities Manager John Arrowsmith had not yet received the details of the plan, but said he was “cautiously optimistic.”

“This proposal would cost the county considerable less money than the EPA’s,” Arrowsmith added.

Flynn was unable to comment on the EPA’s reaction to the proposal. However, the NMED was in communication with the EPA throughout the entire process and provided the agency with a list of alternative proposals that included the state’s recommendation.